Why the super-rich are making it hard for George W. Bush to put through even modest plans for estate tax cuts

http://www.jewishworldreview.com --
PRESIDENT George W. Bush knew from the start that his
tax cut plan might face some opposition. What he
probably did not expect was that the charge against him
would be led by America's multimillionaires, a group he
thought he was helping.

Last week a number of these multimillionaires launched
their battle against the president by publicly assaulting
an obscure and relatively unimportant corner of his
programme: the abolition of America's inheritance tax, the estate tax. The most
outspoken of the group was that emblem of free-market virtue, Warren Buffett
himself. While the attackers are concentrating on blocking estate tax abolition, it is
already clear that their campaign may jeopardise other, more significant changes,
such as the president's across-the-board rate cut.

That the anti-wealth hostility would be so strong, and that it would emanate from
this particular group, may seem somewhat surprising. After all, Americans today
are generally more comfortable with the idea of wealth than they were in other
periods.

The nation's best-seller lists are replete with how-to books on money
accumulation. The best-known of these is The Millionaire Next Door, the thesis of
which is that anyone can become a millionaire if he emulates millionaires' habits
(invest; do not waste cash on flashy cars). Society has elevated Mr Buffett and
other entrepreneurs to the level of national icons.

So why is the animus so strong? The answer lies in America's 1990s prosperity. It
has been so sustained as to change Americans' attitudes towards money, giving
rise to what may be called the new guilt culture.

The new guilt predominates among people who have done well and now feel
compelled to pay society back, both through philanthropy and by offering political
support for economic redistribution.

The culture abhors classic Republican free-market thinking as unfair, extreme
and declasse. The newly guilty find great appeal in the idea of "dying broke": they
want to purge themselves and their children of the sin of money. Even though they
themselves have benefited from the social utility of the private sector, they feel
their legacy will be most socially useful in public and collective hands.

America has always had its share of guilty wealthy. Recall the "limousine liberals"
of the 1960s, 1970s and 1980s. Many of this well-to-do crowd were heirs. Some of
their hostility was psychological. They wanted to revenge themselves upon their
parents, or at least show them up.

The new guilt culture is a bit different. Its members start out as middle-class
children. They tend to divide their lives. They devote the first stage of their careers
to making money in the most exemplary and aggressive fashion. Then, in mid-life,
they enter a second stage, repudiating or ignoring their own shark-like behaviour.

The lottery-style mood of the internet boom helped to fortify the new guilt culture.
Many of the newly wealthy accumulated their wealth in months, or years. It did not
take them the lifetime that was the old norm for fortune-building. They fear they do
not deserve their money.

In last year's elections, the new guilt culture buoyed the Democrats, giving them
victories in former Republican strongholds such as California. There were even a
few explicit new guilt candidates - self-made millionaires who spent their money
to campaign for less capitalism and more redistribution. The popular victory of
Vice-President Gore was to some extent a new guilt phenomenon: the newly guilty
liked his focus on "doing our share".

While aware of this cultural shift, Mr Bush probably still thought he had a decent
shot at abolishing the estate tax. There is a number of legitimate reasons to do
so. The first is that the tax is a heavy one. It kicks in slowly - the first $675,000 of
assets are currently exempt. But the tax then moves up smartly to a top rate of 55
per cent of assets.

The principal casualties of the estate tax tend not to be the Warren Buffetts, whose
attorneys find ways to help them escape its snares. More often the estate tax hits
people who lack the foresight to build elaborate defences. In America, families
whose main wealth consists in a single illiquid asset - a house, or a family firm -
tend to be particularly hard hit.

The final point in its favour is that the revenue the tax pulls in is a relatively small
sum in budget terms: only a fraction of the amount of some of Mr Bush's other
reforms.

None of this deterred abolition's opponents, who advertised their hostility in The
New York Times. On a website, "www.responsible wealth.org", new guilt joined
old guilt (Frank and Jinx Roosevelt and others with reverberating surnames) to
defend the levy. They argued that American society had become too prosperous
and that, without the estate tax, the US would soon be at the mercy of a new
wealth aristocracy.

Mr Buffett told The New York Times that dropping the tax would be like "choosing
the 2020 Olympic team by picking the eldest sons of the gold-medal winners in
the 2000 Olympics".

Within 48 hours of the Buffett assault, Mr Bush received the bad news that the
razor-thin support for his overall plan was eroding: two Republican senators had
said that they would not vote for Mr Bush's legislation. One of them, Lincoln
Chafee of Rhode Island, said that "the public doesn't want us to do anything too
radical".

None of this is to say that Mr Bush will fail in his programme, or at least preserve
features of it that are far more significant than estate tax abolition. The case the
president makes - that lower rates bring opportunity - is enormously strong,
particularly given America's international record in past decades. Still, the battle
will be tough, for it is not merely a tax battle. It is also prosperity's new culture
war.

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